Exercise 9-39 Activity-Based Costing in a Service Environment (LO 9-3,4,5) Elite Lawn & Plowing (EL&P is a lawn and snow plowing service with both residential and commercial clients. The owner believes that the commercial sector has more growth opportunities and is considering dropping the residential service. Twenty employees worked a total of 35,000 hours last year, 22,000 on residential jobs and 13.000 on commercial jobs. Wages were S16 per hour for all work done. Any materials used are included in overhead as supplies. All overhead is allocated on the basis of labor-hours worked, which is also the basis for customer charges. Because of increased competition for commercial accounts, EL&P can charge $34 per hour for residential work, but only $27 per hour for commercial work. Required: a. If overhead for the year was $116,050, what were the profits of the residential and the commercial services using labor-hours as the allocation base? (Do not round Intermediate calculations.) Profit Commercial Residential b. Overhead consists of costs of traveling to the site, using equipment (including vehicle rental), and using supplies, which can be traced as follows: Cost Driver Volume Commercial Residential 17 So Activity Traveling Using equipment Using supplies Total overhead Cost Driver Number of clients served Equipment hours Area serviced in square yards Cost $ 18,090 35,980 62.000 $116,050 3,500 110,000 2,300 90,000 Recalculate profils for commercial and residential services based on these activity bases. (Do not round intermediate calculations.) Profit Commercial Residential